Thursday, August 25, 2016

More Problems for Austrian-Lites: The Middle-Wage Employment Picture is Stong

Austrian-lites, who held the view that the Federal Reserve would not be able to maintain the December 25 basis point rate hike, that it would plunge the economy into collapse, now face another significant data point that flies in the face of their theory.

One of the economy’s bright spots is the job market — and it may be even brighter than it seems. Not only are there more jobs (1.3 million so far in 2016), but they may be better-paying, according to a new analysis by economists at the Federal Reserve Bank of New York. The Fed economists report that middle-wage workers — earning roughly $30,000 to $60,000 — represent the fastest growing segment of the labor market. By contrast, earlier in the recovery, low-wage and high-wage jobs dominated employment increases...

With the recovery now in its eighth year, confidence and hiring have strengthened...Between 2013 and 2015, blue-collar jobs rose sharply. Employment increased 400,000 in construction, 300,000 in manufacturing, 500,000 in transportation (mainly truck drivers) and 250,000 in installation and repair (of, say, air conditioning systems).

This is not what a recession looks like.

Those who expected a collapse in the economy (and the Fed to go to negative rates!) completely fail to understand the nature of how the Fed manipulates the economy. There is no Austrian school theory which says the Fed can never prop up the capital goods sector. To think the economy must always be in collapse mode suggests a limited understanding of Austrian school business cycle theory. It's a boom-bust cycle. At present, we remain in the boom phase, based on the sectors of the economy you would expect to be strong in the boom phase as outlined by Austrian school theory.

I don't think there is an actual definition. Bob just uses the term to refer to commenters that disagree with him very vocally but do not have a very good understanding of ABC theory. They tend to be perma-bears and tend to misunderstand Bobs analysis because of their misunderstanding of the boom-bust cycle.